Understanding FEFO: Guide for the Food Industry

Today, many industries deal with perishable goods. One of the leading industries is the food and beverage industry. Seamless Inventory Management is the most important aspect of the food industry because customers always demand freshness and quality in their food items. It is obvious that the larger the factory, the more raw materials it produces. Managing a huge number of raw materials can be a challenging task.

This is where FEFO (First Expired, First Out) outshines any other strategy. This blog aims to share insights on the importance of the FEFO method in the food industry, the battle of FEFO vs. FIFO, and the best practices for managing perishable goods.

Inventory Management Methods

There are four prevalent inventory management methods such as

• FEFO (First Expired, First Out)
• FIFO (First In, First Out)
• LIFO (Last In, First Out)
• Average

Let's understand two of the significant and widely used inventory management strategies.

What is FEFO?

First Expired, First Out (FEFO) is an essential inventory management strategy for the warehouse function in the food industry. It prioritizes the usage or sale of perishable items with the nearest expiration first.

This is especially useful for different industries dealing with perishable products such as F&B, cosmetics, and pharmaceuticals. With this method, enterprises can drastically reduce waste, maintain high product quality, and escalate customer experience.

What is FIFO?

First In, First Out (FIFO) is an inventory management method that emphasizes organizing and managing inventory on the basis of the order in which the products were received. This method is mainly used in industries like manufacturing and retail.

The FIFO method reflects that the products with the oldest data of receipt or age must be used or sold first, whereas the newest items must be used or sold last. It is a commonly used method in the food industry to manage non-perishable products that have longer shelf life. This includes products like dry goods, canned items, etc. 

FEFO vs. FIFO: Which is Better?

FEFO and FIFO are both widely used inventory management techniques, but they both serve different purposes. 

• FEFO: This method lays importance on using or selling inventory that has the closest expiration date. It is extremely useful in the F&B industry that deals with perishable goods whose shelf life is shorter. By using or selling the items before they expire, this method helps businesses to ensure food safety and quality.
  

• FIFO: This method lays importance on using or selling the oldest items first. This is most commonly used in many industries that deal with non-perishable goods where selling older stock is important before selling the newer one. This is extremely beneficial to industries selling products where expiry data is not a primary concern. 

Importance of FEFO in the Food Industry

Although FIFO is a popular inventory management technique, it is not the optimal choice for the food industry. It may prevent enterprises from overstocking old inventory, but it never guarantees the freshness or quality of the products. On the other hand, FEFO is a technique that is specially designed for companies selling perishable items. FEFO plays a vital role in addressing the challenge by:

• Reduced Spoilage: This method reduces food wastage or spoilage issues by using or selling products with the nearest expiration date. This helps to save costs and promote sustainability.
  

• Better Product Quality: This method ensures that consumers always get fresh, high-quality products. This not only increases customer satisfaction but also improves brand loyalty.
  

• Elevated Food Safety: By using or selling products with the closest expiration dates, the FEFO method ensures that high standards of food safety are maintained. This minimizes or eradicates any risk of selling spoiled products.

Advanced Warehouse Management with D365

Microsoft Dynamics 365 is a robust ERP that offers advanced warehouse management features. By leveraging D365, enterprises can: 

• Automate Tracking: Dynamics 365 enables businesses to automate the inventory expiration date tracking process. It offers business with accurate and latest information.
  
• Optimize Picking and Packing: D365 allows enterprises to smartly prioritize picking, packing and shipping items that have the nearest or earliest expiration dates.
  
• Real-Time Inventory Visibility: Dynamics 365 offers real-time visibility of inventory levels and expiration dates of the products.
  
• Seamless Integration: D365 seamlessly integrates with other processes like logistics, sales, procurement and other Dynamics 365 products as well.
  
• Alerts and Notifications: Businesses can get alerts and notifications regarding the product or item expiry dates within Dynamics 365.
• Reports: Dynamics 365 ERP for Food and Beverage Industry automatically creates detailed reports to keep an eye on product lifespan and its expiry dates.

Best Practices for Implementing FEFO

• Good Distribution Practice (GDP)
  GDP is a set of guidelines that enable businesses to ensure that their items are consistently produced with safety and high-quality standards. It can be used in the F&B industry, covering warehouse management, transportation, shipment, and customer delivery.
  

• Stock Rotation
  Accurate stock rotation is essential for implementing FEFO. This includes product movement (with the nearest expiry dates) to the front of the shelf. Newer products must be placed at the back of the shelf. 
  

• Accurate Data Management
  It is important to keep track of all the inventory data and its expiration dates within your ERP system. Conducting regular audits can help enterprises verify the accuracy of their data management process.
  

• System Configuration and Staff Training
  Businesses must configure a robust ERP system like Dynamics 365 to support FEFO. They must also educate their staff about FEFO and how to use the ERP system to effortlessly manage their inventory.
  

• Product Barcoding
  Barcoding products make it easy to track and manage products that have shorter life span. With serialization and barcoding, enterprises can eradicate any sort of errors or discrepancies that can affect the supply chain.
  

• Supplier Collaboration
  Work and collaborate closely with the suppliers to ensure the products with shorter shelf life are delivered on time. Clear communication helps to quickly address product quality or expiration date issues.
  

How to Set Up the FEFO Strategy?

Step 1: Organize
The first step is to organize and classify the products you have. Classifying and manually sorting raw materials can be tiring and time-consuming. Use an ERP system that support your FEFO technique and can automatically arrange the product categories.

Step 2: Label
Use this step if you are transferring or storing your raw materials in a container. Labeling the container helps in easily identifying the items and their expiry dates.

Step 3: Arrange
After organizing and labeling the items, they must be arranged in a sequence. The products having longest expiry dates must be placed at the back of the shelf whereas the ones having nearest expiry dates must be placed at the front of the shelf

Step 4: Repeat
It is a continuous process. Hence, you need to repeat these steps continuously at the time of the resupply of materials. This ensures that the FEFO technique continues efficiently. While buying or restocking materials, it’s essential to check expiration dates of the items.

In A Nutshell

In the food industry, freshness, and quality products are the top priority and FEFO is the best inventory management strategy to achieve this. By using the First Expired, First Out (FEFO) technique, enterprises can reduce food waste due to their expiry and escalate customer satisfaction. Implementing FEFO in integration with a cutting-edge ERP system like Dynamics 365 can turn the tables for your company.

Don't Let Freshness Go to Waste: Implement FEFO Today! It’s time to Keep Your Food Products Fresh and Your Business Profitable!